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Paying for equipment for your business can be a major investment. However, you don’t need to fork over the cash upfront in every case. You can work with a lender to get either a loan or a lease on the equipment. Both of these options have some great benefits. Understanding each of them will help you make the right choice for your business.

Equipment Loans

When you take out a loan to buy equipment, you own the equipment after purchase. You need to repay the loan and the equipment will likely be used as collateral, but it is yours. This means that it doesn’t matter whether you keep it for a year or a decade. If you keep up with payments, you can use the equipment however much you need.

For capital equipment purchases, this can be very valuable. Ultimately, you can get the best value from your equipment, provided that you expect to use it for a while.

Furthermore, when you are ready to move on from that equipment, you can sell it to another party to recoup some of your costs. Alternatively, you may want to use the value of the equipment to secure another loan. Of course, these benefits all assume that the equipment has some value.

Equipment Leases

With a lease, you don’t own the equipment but can simply use it for the duration of the lease. Some leases have a buyout option that allows you to purchase the equipment at the end of the term. In some cases, this is for a nominal amount of money (essentially creating a lease-to-own agreement).

One of the key benefits of a lease is that you aren’t stuck with the equipment at the end of the lease. If you don’t think you will need it or if you think it will become obsolete, certain equipment is much better suited by a lease. You limit your risks and simply pay to use equipment when you need it. This is popular with fleets of equipment such as vehicles because it is rare to need a specific piece of equipment for more than a few years.

Additionally, leases have some great tax benefits. You can write off the full cost because it is an expense, not a payment towards an asset.

Learn More

Discover more about equipment financing and leasing today by contacting the team at WHW Capital.